The Reality of Electricity in America

Electrical powerlines on a sunset

Doubling the US industrial capacity requires 50% more electricity…already a high barrier to entry. If we want to throw in some new data centers, add another 25-50% on top of that. No small feat.

Should the US want to accomplish this industrial buildout, then heavily investing in long-distance lines is essential. The data centers are going to require 24/7 baseload, which means nuclear or coal (and natural gas for surges). So, you’ll have to swallow that pill too.

Power needs to be able to flow from where it’s created to where it’s needed. Transmission is the name of the game. Without that, none of this works. And if someone tries to paint a different picture for you, maybe don’t drink their Kool-Aid.

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Transcript

Hello from Hazy Colorado. Today we’re taking a question from the Patreon page. Specifically, it’s about electricity and data centers and what is it going to look like if we’re going to do all these data centers, much less consider doubling the size of America’s industrial plant? 

How much power do we need in what is going to look like on the other side? How do we get there? A lot, a lot wrapped up in there. Let’s start by saying that we need 50% more electricity if we don’t do data centers, if all we’re going to do is double the industrial plant, data centers are on top of that, and that’s another 25 to 50% based on which model for the future of data centers that you want. 

Now, everyone broadly agrees on the problem here. Now, one of the big weaknesses in the United States grid is it’s not very well interconnected. We don’t have a lot of cross state, large scale electricity transmission lines. And what that means is that regardless of where you need electricity, you’re kind of stuck with local resources in order to get what you need. 

And that means you’re going to be overbuilding capacity in order to guarantee what you need, which means you’re going to have more facilities than the nameplate would suggest, and they’re going to be running that lower capacity. And that’s particularly true if you want to do something, say, with green tech. So, for example, if you put a big solar farm in, say, Arizona, you’re going to generate three times as much electricity as if you do it outside of New York City. 

And so the whole idea of a long range transmission line is you can take the power from where it can be generated efficiently or cheaply, and move it to the places that can’t. And in that way you get a much more efficient system, even if it might cost a little bit more. So roughly, if you expand the grid by half, you need about $1 trillion in new plant, new generation facilities, and then about half $1 trillion in distribution systems that assumes you’re doing everything within state boundaries. 

You’re paying more for more nameplate than you probably could use, because you’re gonna have lower efficiencies, but also means higher manufacturing costs, higher installation costs. Or you can spend about maybe 20% more, if that 20% more is almost exclusively on long range transmission. And if you do that, you build less generation that is more effective at what it does. 

And you wire in the power. Here’s the issue. The United States really doesn’t have any of those long range high voltage lines. In fact, if you’re looking at above 70 kilovolts, which is kind of the standard for like the big stuff, we only have one cluster in the country, and that is an area roughly a triangle between Pittsburgh, Pennsylvania, Chicago and Saint Louis, because in the middle of that triangle is coal country. 

And back during the 60s, 70s, and 80s, a succession of American governments came to the conclusion that it was cheaper to wire electricity than it was to rail coal. So you generated the electricity within this triangle and then had these massive lines to send that power somewhere else. 

If the goal is to have a lot more electricity, regardless of why that version of the model needs to be replicated more or less nationwide, and that is easily a $300 billion program, probably more now. 

Data centers specifically, something that everyone seems to forget, is that data centers churn all the time, 24 hours a day, which means any sort of power generation that cannot generate electricity 24 hours a day is something that a data center will not consider. So solar out because it’s dark every night, wind largely out because most places don’t have reliable wind currents. 

Although in some places, if you go high enough, that’s a possibility, which merely means you only have two options. Number one is you can build a new fleet of nuclear power plants because while they can be spun up and down, the Nuclear Regulatory Commission really doesn’t like to see those numbers change because it looks a little bit like a meltdown. 

And we try to avoid those. So you build a nuclear power plant either specifically for it or nearby, or you refurbish an old one, whatever happens to be baseload power, that’s what you’re after. Baseload power. The only other option is coal. Yes, you can build a natural gas plant, but natural gas is better for spinning up and down. 

You want it for surge capacity as opposed to more generally for baseload capacity. So either you’re getting nukes or you’re getting coal. And if you want data and you don’t like those two things, then you might as well does not try to do either. Data centers at all. And just kind of forget the next 30 years of human technological advance. 

This is what you need. Lots of long range transmission, lots of nukes, lots of coal, and then natural gas, solar and wind for everything else. Anyone who cannot lay it out like that to you, it’s been blinded by a degree of ideology or personal interests. This is what you need is a digital future or a more industrialized future is what you’re after.

Navigating Reindustrialization in a Deglobalized World

American reindustrialization image

The world we’ve known and loved is going away, which means the US will have to pull itself up by its bootstraps and get to work…because there is a massive defense buildout and reindustrialization looming on the horizon.

The first order of business is figuring out the energy situation. Tariffs and policy decisions are limiting solutions, so localities that want to benefit from reshoring need to solve their own power generation and grid issues. Then we have the people problem; there are simply not enough skilled tradespeople to carry out the reindustrialization effort. And lastly, we have the defense buildout. While this sparked an economic boom and pushed the limits of innovation in the past, this time around…we won’t be so lucky.

Can Anyone Replicate the US Shale Revolution?

An oil rig on the sunset

The US shale revolution has altered the trajectory of the US energy sector, but can that success story be replicated anywhere else? Let’s head down under and examine Australia’s shale potential.

The Aussies have some promising geology, but lack practically every other metric that contributed to the success of the US shale revolution: abundant water, proximity to cities and infrastructure, deep labor pool, fast-moving regulators, and favorable mineral rights for landowners. That last one is the big one, because without that monetary incentive for landowners…what’s motivating anyone?

There are some other countries that have a better shot at replicating the US shale boom. Argentina already holds the second-largest shale industry. Mexico and Canada have the shale resources, but their industries are so tied to American infrastructure and markets that the US would have to help.

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Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado. Today we’re taking a question from our Patreon page, specifically from one of our friends down in Australia, wondering if it would be possible for Australia to recreate the sort of energy complex that the United States has, courtesy of the shale revolution. The United States is now just a gross over producer of both oil and natural gas. 

It’s driven down energy costs in the country, especially electricity costs, which are now among the lowest in the world. And it’s generated a robust processing and manufacturing system with downstream work and a significant export industry, Australia having a smaller population, but almost as much land could they do it? I don’t want to say no, but there’s some things you have to keep in mind. 

Number one, geology is just the first step. So in order to have a shale industry, you have to have a lot of sedimentary layers that are petroleum bearing that just the right age to generate oil, natural gas. And the United States has that because in the past, the North American continent, especially our part of it, has had a series of shallow seas. 

And then geology would change, and then you’d get another shallow sea and you basically got these stacked layers so you can drill down and hit multiple petroleum producing zones. In fact, in some places in West Texas, you can have upwards of 20 layers that you can all access from one vertical. Now with shale technology, you go down it until you hit that layer and then you go horizontally. 

And that brings us to the second thing. You need water. The way shale works is you make this suspension of water and sand, and that is pumped into the lateral through a series of holes that basically crack the, rock open and release the petroleum. And then back pressure pushes all the liquid out and eventually oil and natural gas comes to the surface. 

Don’t have to pump the stuff, but you have to have the water to do it. And part of that folds into the third issue, which is proximity. You have to have relative proximity for your oil and natural gas production. Two population centers are places that can take the stuff for processing. And in this this the United States is pretty good. 

We have shale zones in Texas, which of course can get pumped to corpus Christi in Houston. And the rest we’ve got some in Colorado which benefit the Denver area. We’ve got some in Ohio which can be pumped into the Northeast and Pennsylvania. Same thing. Australia’s problem is that most of the geology that looks promising is in the outback. 

So not only is it a long ways away from any potential population centers, you’re in the middle of a literal desert, so the water access is more difficult. You can access groundwater that’s done in the United States, too. But all of these things incrementally raise the cost of development. Let’s see what else. Regulatory structure. This is one where a lot of countries, trip up shale wells, as a rule, generate somewhere from the hundreds of barrels to thousands of barrels a day, which sounds great, but it’s not like the mega wells you’re going to get a place like, say, Saudi Arabia. 

So you’re going to have more of them and they’re more involved from a technical point of view for production. So you have to have a more advanced educational system to generate that sort of workforce. And the United States really does stand out among the world when it comes to petroleum engineers, because we’ve been doing it for so long. 

The shale revolution at this point is about 20 years old. In the United States. Our first oil deposits were back in the mid 1800s. So this is something that we’ve been going and going and going. It’s not that the Australians don’t have that, but most of what the Australians have been doing for energy production in the last 30 years has been offshore, where they tap foreign labor almost as much as local labor. 

So there’s there’s a labor crunch there. In addition, if you live in Houston, you can work in West Texas. If you live in Sydney or Brisbane, you’re probably not going to be working on the northwest shelf. It’s just too far. So linking these together, and then on the regulatory side, you have to be able to do things on the fly very, very quickly and have a regulatory structure. 

That’s okay with that. So in Texas, the Texas Railroad Commission, which is the one that regulates the space issues, permits 24 hours a day, 365 days a year. They drill on Sundays, they drill on Christmas. And if you don’t have an institution set up to handle that, everything else gets pushed back. This is one of the reasons why the shale attempt in Poland just didn’t work out, because the poles tried to work European hours and it just didn’t fly. 

The geology wasn’t as good either. But the most important thing, the single most important thing is landowners have to have an interest in the industry. So in the United States, unless you have signed it away, you own the mineral rights on your land. So if a petroleum company comes and wants to drill in your land, you get a chunk of the proceeds. 

We’re the only country in the world that does it that way. So when the United Kingdom tried to kick in the shale that ten years ago, they discovered huge amounts of local opposition because the companies would take all of the money, and that would be that the locals had to deal with the noise and the traffic and all the rest, and they saw absolutely no benefit. 

Australia is kind of in that camp. So if, if, if this is going to happen, it’s going to take a lot more money and put a lot of pressure on the labor force and require a regulatory and maybe even a legal overhaul of property rights in Australia in order to generate the sort of outcome that you might want to see. 

There are three countries, however, that are worth keeping an eye on when it comes to shale that are closer than Australia to achieving something like the United States. The first, ironically, is Argentina. They already have preexisting infrastructure in a place called vacuum worth a dead cow fields which are very close to populated Argentina, including Buenos Aires. The socialist governments of the past set a price floor. 

So anyone going to invest knows how much they’re going to get out. So even though the property law structures are weird and it’s Argentina. So if they’re very weird, if you know the rules of the game on the day that you start, you can get some projects going. And so Argentina already has the second most successful shale industry in the world. 

The other two to watch are Mexico and Canada. both have a shale fields that in many ways are extensions of the American geography, especially northern Mexico. The weird thing about Canada in Mexico, though, is their closest population centers for most considerations around the American side of the border. So if we’re going to ever see a successful shale industry in those two countries, it will be because they’re accessing American infrastructure, population structure, processing infrastructure and basically linking into a greater North American energy grid. 

Doesn’t mean it can’t happen, but if you’re in Ottawa or Mexico City developing a local energy sector to serve another country, let’s just call that a bit of a political complication.

Child Care for All? In New Mexico?

Welcome sign for New Mexico

Despite New Mexico’s hot air balloon festival and dramatic landscapes, there’s not much else going for the state. They rank low on economic and social indicators, they have an arid climate, they’re navigating complex racial and tribal dynamics…needless to say, they could use a win.

That win may be coming in the form of a state-funded child care program. Funded through the state-level oil fund, an estimated $600 million per year will go into this groundbreaking program. If you’ve listened to me for any time at all, you’ll know the demographic crisis we’re facing. Programs like this are one of the few proven ways to effectively address this issue.

Sure, there are plenty of details to iron out, but let’s take the good news and say happy holidays.

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Transcript

Hey, everybody. Peter Zeihan here coming to you from Colorado. And today we’re going to talk about something that just went down in New Mexico, of all places. Now, for those of you who are not from the United States, New Mexico is a gorgeous state, but it comes in near the bottom of basically all the rankings that you, don’t want to come into the bottom at. 

So, you know, crime, labor force participation, income levels, educational levels, infrastructure industry. It’s had a lot of problems. It’s a it’s a pretty arid area. There are very few places get reliable rainfall. You’ve got two major cities in Santa Fe, which is an old historical town that is now the administrative center in Albuquerque, which is the major population center. 

But infrastructure is difficult because you get the Rio Grande Canyon that basically cuts right through the middle of the state, and you have a lot of desert and a lot of semi-arid. That’s before you consider, racial issues or the fact that this is one of the densest concentrations of Native Americans. And there’s an issue with reservations. 

But anyway, there’s a lot that hasn’t worked out great for them. But the reason I wanted to talk about them is that they just came up with a new policy where everyone now qualifies for state covered child care. One of the problems the advanced world has is that raising a child is a real effort. 

Back in the olden days, when we were all agriculturalists and lived on the farm, kids were free labor. So parents would have as many of them as they could because they helped on the farm. When you moved to town, that economic benefit goes away and you just have the expense without any of the monetary benefits. So over time, we’ve had fewer and fewer and fewer children. 

One of the things Europeans tried when they tried to reverse this is it really matters what type of social program you put into place. So, for example, if you just say that if a woman is pregnant that she gets a extended maternity leave, what that means is that no one will hire a woman. And so women in their 20s are just simply unemployable. 

The places that have pulled this off, getting their numbers back up, it all comes down to child care. Because if you force a woman to choose between being a mother or being a worker, she will then choose one of the two. And that means that some of them won’t have kids or some of them won’t work. 

And you had got a problem with the workforce and with your demographics. But if the state can provide a degree of child care, then parents don’t need to make that choice. And the numbers go the other direction. Now, there are undoubtedly a thousand details that matter in the New Mexico situation. So this is not in me endorsing what they’re doing except in principle. 

It matters how you pay for it matters how you regulate it. The New Mexicans are planning on using income from the oil fund. They basically have a sovereign fund at the state level. And they expect that it’s going to cost them about $600 million a year. We will see if that is feasible. Will you? We’ll see if that is realistic. 

But for the first time in the United States, we actually have somebody at the state level that is thinking about what the future of the demographic profile looks like and what the future of the workforce looks like and is actually putting a fair amount of money behind what might actually work. I call that good news.

Ukraine’s Energy Scandal

Hand offering stacks of Ukrainian money

Some officials over in Ukraine have been stuffing their pockets with $100 million stolen from the energy sector. Before you get worried that someone has been dipping into the US or EU aid…this dates back long before all that started flowing in.

Before the war in Ukraine, Russian natural gas transited the country in massive volumes. Guided by the morals of the Soviet system, Ukrainian officials took their cut off the top of the profits. Once the war hit and the gas stopped flowing and the bombs started falling, Ukraine rushed to modernize its process. Updates were made and efficiency became the focus, but those who benefited more from the old system clashed with the new models.

These reports are now surfacing, and many key figures implicated in the corruption have already fled Ukraine. So, what should we expect? We were seeing a major overhaul of the energy structure anyway, now it will just coincide with some political and economic house cleaning…and mounting pressure from the war.

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Transcript

Hey all. Peter Zeihan here coming from Colorado. Today we’re gonna talk about a scandal that’s breaking in Ukraine. President Zelensky is in a bit of hot water because some of his former allies, not current, have basically been charged, accused of stealing upwards of a $100 million from the system, mostly from the energy sector. What? This is what this is not. 

Let’s start with what is not. This isn’t people stealing the aid that has come from the European Union or the United States to help with the budget or military equipment or anything of that. In fact, the Ukrainians have a really digitally ironclad system where they film every part of the weapons transfer system right up until its usage. 

So there’s a digital record showing that it didn’t end up in a black market. So people who say that that’s just conspiracy theory bullshit, mostly generated by, the Russian bot farm. What it is, though, is real corruption. The Ukrainian energy system is kind of a mess. And not just because of the war. It used to be completely state controlled, and you basically had a government enterprise who controlled the natural gas transit system that crossed the country from the Russian space into the European space. 

The Ukrainians charge transit fees for that, and then took a bit of the natural gas as payment in-kind in order to fuel their entire economy. And because the energy was coming from the former Soviet system, the people who were in charge of it had a very bureaucratic Soviet mindset and part of the bureaucratic Soviet mindset is I get 2%. 

So what happened? Was Ukraine unique among the former Soviet republics? Really unique within the Eurasian landmass, thought of itself as having free energy provided for by the Russians from 1992, when formal independence happened, until very, very recently, certainly until the war started in 2022. And so there was never any effort by the Ukrainian state to become more efficient. 

And in terms of the calories burned or the energy consumed per dollar of GDP, Ukraine usually figured in the very, very bottom of countries in the world, certainly on the continent. 

So the people who were in charge of this system made money on the throughput, and so volume was all that they cared about because they got a percentage cut of everything. 

Enter the war. With the war, the energy system has been under attack, and the state bureaucratic model is not very good at responding to that, because it’s never been about efficiency. So bit by bit by bit, the Ukrainian system has become more efficient because if it hadn’t, the power plants would have never been rebuilt, the transformer stations would have never been repaired, and the country would be living in the dark. 

You put this against that old statist model, and eventually we were going to get a crunch because Zelensky, like every president before him, had to keep the lights on. And so the people who were the corrupt ones had to work with the new ones who came in, operate on more of what we would call a market basis here in the United States. 

And they were getting more and more and more of the system, because every time something was damaged, it moved out of full state control into some more of a hybrid system. Well, so much has now been destroyed, especially this last winter, that finally, these two almost diametrically opposed approaches, vast volumes and corruption versus more efficiency, came to a clash. 

And now we’ve got the exposure. Is it something that can bring the government down? Who knows? He definitely involved himself with the people because he was the president and it was the country, and that’s what he inherited. And he had to, Does that mean it could have been cleaned up sooner? Sure. But I’m not the one that’s fighting a war right now, so I have a hard time making that value. 

Judgment. All we know for certain now is that the chief people responsible have fled the country. And so they’re definitely no longer getting their cut. And that means we’re probably going to see a significant overhaul of what’s left of the statist energy system in just the next few weeks, against the backdrop of the Russians being much more effective at targeting energy assets across the country. 

So it’s not just that we had a corruption scandal and now the personalities are changing. We also have had so much physical destruction of the assets that it’s a question of whether the old system will persist at all. Keep in mind that the Europeans have now cut completely their use of oil and natural gas that comes through Ukraine from Russia. 

Those pipelines are basically shut down now with a couple of minor exceptions. So we were always going to see a house clean of this from an economic point of view. Now we’re getting a house clean from a political point of view as well.

China’s New Ship: Enter the Sichuan

LHD Sichuan Class Aircraft Carrier | Photo by Wikimedia Commons: https://en.wikipedia.org/wiki/Type_076_landing_helicopter_dock#/media/File:LHD_Sichuan.jpg

Let’s talk about the Sichuan. And no, we’re not ordering take-out. We’re talking about China’s newest Type 076 amphibious assault ship, similar to the US Wasp-class.

Through the lens of global power projection, this falls short; it doesn’t have the range or speed necessary. However, this ship isn’t meant to cover too much ground. It’s designed for near-coast, amphibious assaults within 1500 miles of China. You know what lies within that range? The first island chain.

If all China wants to do is bully its smaller neighbors, the Sichuan will do the job fine. Should it find itself caught in any real naval combat…I hope they have enough lifejackets.

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Transcript

Hey all Peter Zeihan here coming to you from Colorado. Today, we are going to talk about the newest vessel in the Chinese navy, the Sichuan. It is a 40,000 45,000 ton carrier. And it’s roughly analogous to the US wasp class, which are the core of our expeditionary units. And so, of course, the core questions is, is this something from a military point of view, the United States should worry about, big problem that the Chinese have always had with all of their vessels is while they have teeth and they’ve got decent missiles, and those missiles have reasonable ranges. 

The ships themselves don’t have long legs, and the Sichuan is no exception, that it’s probably maximum emergency speed is less than 25 knots, probably closer to 20, which means that even three days in full sprint, it’s just not going to go that far. From the point of view of global power projection. It does have a wet deck. 

It is designed to help with amphibious landings. But it just doesn’t have the range or the speed to compete with anything that the United States has put in the water, really since the 1960s. It does that mean that it’s a pointless platform? Not what I’m saying. What I’m saying is it’s no good for power projection at distance. 

It can’t operate in the Central Pacific, much less the Indian Ocean or anywhere else. But that is not the strategic environment that the Chinese would like to contest with it. They’re concerned primarily about the first island chain, which are at the line of archipelago, starting with from Japan in the north to Taiwan to Philippines, to Indonesia and Singapore. 

That is the line of islands that basically block in the Chinese and mean that the Chinese are ever, ever, ever going to be a, naval superpower. They need to have a navy that’s at least five times as powerful as the US Navy, because they have to get through all these potential interdiction points or conquer them first before they can even pretend to be a global naval power. 

And the situation in that context is a step in that direction. Basically, if you’re within 1000 1500 miles of the coast, the system can operate, and it’s designed for insidious assaults. So you use those against islands in particular, most notably Taiwan and the Philippines. And for that specific task, this is probably the right ship for their needs. But if it comes up against any capable naval power and I’m talking here, Australia, Japan and the United States, of course, in this theater, want to look elsewhere. 

You’re looking at the United Kingdom or France or Turkey. This ship will go down fast. It’s not quick. It doesn’t have long legs. It requires a massive logistical train, which is something that the Chinese aren’t very good at at all. So in a hot war against a country that actually has a meaningful navy, this thing is almost useless. 

The Chinese aren’t planning on using it against somebody who has a navy. They’re planning on using it to intimidate the weaker powers immediately in the periphery. For that, it’s okay for anything else. It’s a reef.

Ukraine’s New Drone Killer: The Octopus

Photo of a military drone

Yet another innovation has come from the Ukraine War. We’re talking drone-on-drone warfare. Codename: Octopus.

The Octopus is designed to hunt and destroy other drones. Ukraine sees three main aerial threats from Russia: missiles, glide bombs, and Shahed drones. The last on that list is the real nuisance for Ukraine; these cheap, pre-programmed drones are volleyed into Ukraine by the thousand. Enter the Octopus.

The Octopus drone is a cheap, mobile hunter drone that intercepts the Shahed drones mid-flight. If this new tech proves to be effective, it could change the way drone warfare operates, and a new phase of the drone arms race would commence.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about a new drone technology that you’re probably going to be hearing about pretty soon. It’s called the octopus. It’s a Ukrainian design and unique among drones to this point. It is designed to hunt drones. So the situation that Ukrainians are in is they basically face three kinds of threats from the Russians when it comes to the air. 

Threat number one, our missiles, primarily a mix of hypersonic and, ballistic, which can be and are intercepted by a variety of air defense systems up to and including the American Patriots. And it’s not that the Russians don’t know how to make good missiles or anything, but what we’ve seen in the last three years that even their best ones, even their supersonic ones, can be taken down by a patriot. 

Pretty reliably. It doesn’t mean that anyone should rest on their laurels or anything, but that threat has, to a degree, been addressed. The second category are something called glide bombs, and they’re just what they sound like. A Russian jet drops the bomb from over here. It is. Has a thin kid on it, and the bomb glides upwards of 15 to 20 miles. 

So that you can’t really intercept. It doesn’t have a lot of guidance, if any, on it. So from the thins, and the only way you can stop those is to push back the envelope where the jets are dropping from. In this, the Ukrainians have had some degree of success. They’ve got their own jets. 

They’re getting F-16s from a number of NATO countries. And every once in a while, they regularly put their patriots on the front line to shoot down jets that come too close. It’s not a perfect system, but it is something that’s been partially addressed. And the third and most problematic category are cheap mass produced drones, specifically the Shaheds that are, designed in Iran used to all be made in Iran and shipped to Russia. 

Now the Russians have their own assembly and manufacturing capacity. Out further east, away from the front. Shahed cost somewhere between. Oh, based on the model and the number that they’re making $20,000 to $90,000, for the most part. And the problem with your Shahed. Well, pros and cons. First, the cons of the Shahed, there’s so cheap that they really don’t have much for optics or sensors or compute power at all. 

So what happens is the Russians program in specific coordinates, and the head flies there and crashes at those coordinates. So, whenever you see that the Russians have hit a school or a mall or a hospital or an apartment complex, they actually programed in those specific coordinates. So every strike is a war crime. Second, because they’re so cheap, the Russians can field at first a few than a few dozen, and now more recently, a few hundred. 

And the understanding is that by the end of this year, the Russians will be producing these things in the, the thousands of units per month. And so very soon, the Ukrainians are going to be dealing with thousands of these at a time in a single assault. And defending against that is almost impossible with all the technologies we have right now. 

Because if you’re going to use an anti-missile missile that is expensive, each missile costs significantly more than the Shahed does, and you now need hundreds, if not thousands of them. And most countries don’t even have that kind of volume in their arsenal. So that leaves you with things like machine guns. And while there are a couple things out there that work great, their point defense, and they can’t roam and hunt. 

So what the Ukrainians are doing with the octopus drones is an attempt to build a small, cheap drone that can go out as the Shaheds are on their way in and basically work through the way through formation. Pick them off one at a time. And the idea is that the Shaheds, cost more than the defensive drones, than the octopus. 

That’s the theory will work. We’ll see. The Ukrainians, because this is an operational weapons system, are not providing really much of anything in terms of details as to the range and the cost and all that good stuff, but a few things that we know have to be true. Number one, unlike the Shaheds, which don’t have really a processing memory at all, you’re going to need both a GPU and a microprocessor in the octopus drones, because they have to be able to perceive and hunt. 

You need the GPU for decision making capacity. You need the microcontroller for low latency. Those two chips together probably cost, call it 40 bucks for the GPU and probably another 20 bucks for the microprocessor. These are things that Shaheds don’t have because they’re stupid drones. 

That’s still not very expensive. And if you’re talking about something with a relatively limited reach that can hunt something that’s flying 120 miles an hour, it’s theoretically possible that you could drop the cost of that to below the Shahed, because a Shahed has to fly several hundred miles before it gets to its target. 

So a very different profile for the type of weapon system it has. Also, if you have a decent yes, we’re talking 14 nanometer don’t get crazy decent ish GPU along with some, some Dram memory, for probably Nand memory. Ukraines. Yeah, let’s go with Nand difference. Dram is faster and can store more, but it loses all of its memory when it’s powered down. 

Nand doesn’t store nearly as much. It’s not nearly as quick, but you can leave it in the on the shelf for a couple of months, and nothing’s going to happen to the data on it anyway. You throw a bunch of these against a fleet of incoming  Shahed, and if they miss the first one, they just go for the second one and so on.  

Anyway, according to the Ukrainians, these are already in mass production, producing over a thousand units, a month. And if this is true and if it works, it is going to change the face of warfare in the drone age. At this point, drones fall into two categories. Those that can self target kind of like the  Shahed. 

But because GPUs are very subject to vibration and heat and moisture, they’re not hard. You can’t get a good GPU in it to do any real decision making. Just basically they get to the point of arrival. They look around the first thing that they see that hits the target set, they go for that. That’s it. That’s as smart as it gets. 

Or you have a live link back to a controller or a data center, and someone else is making the decision and, programing it step by step. In the first one, you don’t get a lot of accuracy. In the second one, you might get great accuracy, but it’s very easy to jam. So to this point, aside from shooting it down, the only defenses that the Ukrainians or anyone has is to be really good with jammers. And the Ukrainian jammers are now the best in the world, far better than American jammers. 

If you can have a counter drone drone that’s inexpensive, that changes the math. Again, provides an entirely new type of defense that countries can use to protect against drone onslaughts, and probably changes the math of these cheap, mass produced drones that the Russians and the Iranians are doing. 

Anyway. We’re going to know before the end of the year whether this thing works or not. And then we start an entirely new sort of drone race with a fundamentally new type of defense.

Demographic Lessons from the Mongols

cutouts of children and families

Massive population shocks are nothing new; just look at the Mongol invasions or the Black Death. But is the demographic collapse of today comparable to those historic cases? Or are we staring down the barrel of something entirely new?

Well, we’re not going to get a step-by-step guide by looking back at the Mongol invasions and Black Death, but there is a lesson in there. The collapse happens fast (relatively speaking). The building back and transitional times…that happens over generations.

So, demographic collapse isn’t the end; it’s the start of a long and painful process of finding a new system that works. Japan, China, Germany, and Russia will do a bit of guinea pigging for the rest of the world, but everyone’s heading there eventually.

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Transcript

Hey, all, happy autumn from Colorado. Peter Zeihan here. Today we are taking a question from the Patreon crowd specifically. Could I take a look at the demographic decline that’s going on today and compare it to past periods where there’s been population collapses, specifically, the Mongol invasion of the 1200s and the Black Death of the 1300s. Okay. 

Great idea. I’m not sure we’re gonna be able to draw too many comparisons here, but I’ll give you my thinking. Which shapes why I’m very circumspect when it comes to specific forecasts based on demographics. The situation we’re in today is because of industrialization. We all started to urbanize, which means we all started to have fewer kids because on the farm, kids are free labor in the city. 

They’re just an expense. And people can do math, which means that over the course of the next ten year period before 2035, about half of the developed world, plus China is basically going to age into an environment where our economics models don’t work anymore, and they’re all looking at some sort of national, civic or economic collapse going to be pretty ugly beyond that. 

So let’s start with the Mongols. Among us were some scary dudes. And when they started rampaging across Asia and getting to the eastern rim of Europe, they had such a reputation that people ran before them literally until they could get to what is today Poland, because in Poland there were forests. And when the Mongols would charge into the forest, they couldn’t really operate as horsemen. 

They had to dismount. And then all of a sudden they were numbered 100 to 1. So Poland was kind of where the line was. And then, we had a government change among the Mongols. It was a clan based structure. And when Big Papa died, all the little boys went back to Mongolia and basically had an argument over who was going to be the next big papa. And that triggered, civil unrest and basically led to the end of the Mongol Empire. 

Later, a few decades, a new government rose on the scene called the Polish-Lithuanian Commonwealth. Basically, Poland and Lithuania, had some neighbors, the Latvians, the Germans, whatever. And when they went into those lands, they discovered that there was resistance. 

But if they went east, the lands were almost completely empty. So they started going east, and then they found one another and they had a little spat as expanding empires do. They cut a deal. They formed the Commonwealth, and over the next century they became the largest, most sophisticated political and economic structure that Europe had known to that point. 

So clearing the decks demographically can generate something new and maybe even something wonderful if you can get through the transition. The second example is, if anything, even more poignant. That’s the Black Death. When rats carried by traitors spread bubonic plague. Went throughout all of Europe. 

And based on where you were, either one third of your population died, if you were lucky or maybe even over half, that generated a different sort of transformation. largely because of population dynamics. Even after the Black Plague swept through western and southern Europe, these areas had higher population densities than the lands east of Poland did before the Mongols arrived. So these places suffered hugely. But they weren’t emptied out and what they discovered is to maintain the bones of civilization, much less build something new. 

Nobody had enough skilled labor to handle the metal of the wood or whatever it happened to be. So from the Colonel, survivors of skilled labor, we saw an explosion in training, as everyone had to figure out how to do more with less. That’s another word for technology. And so we triggered the Renaissance, which led in time to the Age of Discovery and ultimately the industrial age. 

So both of these examples are great for showing how demographic collapse isn’t the end. But you have to keep a few things in mind. Number one, it takes some time in the case of, the Mongol invasion, for example, it was roughly 1240, 1242, I think, when the Mongols went home and never came back. Poland, the Polish-Lithuanian Commonwealth wasn’t finalized until like 150 years later. 

So, you know, you’re talking 3 to 5 generations of time where you basically had a lot of empty, the area would have been called something like marches. In the case of the Renaissance and the Black Plague, it was faster because the population wasn’t wiped out, but still, Black Plague hit about 1350. It wasn’t until 1400 that the Renaissance got going, and the Age of Discovery started 50 to 100 years after that. 

But for that to shape the general political environment took a lot longer. During this time, during the dark Ages, which was, you know, at this point, almost 800 years in, it was a horrible system, but it was stable. The most powerful country in the world was Ottoman Turkey, because they had a defensible core in the Sea of Marmara region, and they had access to multiple maritime routes of expansion, the Levant, the Aegean Sea into the Mediterranean, the Black Sea and especially the Danube. 

And they would basically expand down those maritime routes. When the Age of Discovery clashed with the Ottomans, the first time it happenedwas in 1529. You know, it’s a couple centuries after the Black Plague and it was indeterminate. 

In the meantime, you had the Age of Discovery continuing with the Portuguese and eventually the Spanish, discovering the new world, stitching together new routes, the old world technology generally progressing, and it would in time overpower the Ottomans. 

But the high water point for the Ottomans didn’t happen until the late 1600s. And it was another century after that, until you got the revolutions of 1787 that actually broke Ottoman power. And even then, the Ottoman Empire lasted for another 40 years before ultimately dying in World War one takes a lot of time for stable systems to unspool. 

So when you’re using these lessons and looking at our near future, yes, the demographic transition from our point of view is going to be very fast the next ten years, or it’s going to be lightning fast and the collapse of individual systems, we’re going to feel in our bones, but waiting for something that is stable to replace it on the other side. 

That requires inventing new models. Ever since the Age of Discovery, we’ve become inured to this idea that the patterns are permanent for every year except for 1 or 2 of the last 500, the human population has gotten bigger. And because of that, economic models that favor expansion do really well. That’s socialism, capitalism, fascism and communism. But if the population starts to shrink, those models aren’t going to make sense anymore. 

And we’re gonna have to invent something new. And the places that have to deal with that first are the ones where the demographic decline is going to come first and be fastest, and the countries on my list for that, that really matter are Japan, China, Germany and Russia, in no particular order. And if you know anything about the histories of those four countries, when they get insecure, things get a little exciting. 

So I can guarantee you that things are going to change. I can guarantee you that the models which we run our economic systems by are going to be different. What I can’t tell you is when this is going to settle out, because I’m probably not going to be around anymore at that point.

Can 3D Printing Save US Manufacturing?

A 3D printer

We’re entering an era where restructuring global manufacturing will be non-negotiable. As supply chains collapse and tariffs complicate this process, can technology like 3D printing take some of the pressure off?

Investments in US manufacturing have declined under Trump’s protectionist policies, since relocating abroad can help avoid the tariff rabbit hole. 3D printing offers a promising solution for reshoring some of that manufacturing, but it’s too inefficient for large-scale production as of now.

As 3D printing improves and finds niches that align, this could be a disruptive technology. However, we won’t be replacing mass manufacturing with these printers anytime soon.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here. Walking down Indian Creek on my way out. Dreaming of Mexican food. But you know that’s not going to get satiated. Because there’s no good Mexican food anywhere near Denver. Anywhere. Today we’re taking a question from the Patreon crowd. And specifically, it’s, building off of some of the concerns that I’ve had with manufacturing. 

The short version is that the more complex the manufacturing system is, the more countries are involved. So when you put tariffs on the import of manufactured goods, either the finished product or the parts, what you’re basically saying is I don’t want to participate in the supply chain because it’s cheaper for everyone to move their production base out of your country. 

And then just import the finished product at the end of the day. Otherwise they have to pay the tariffs two, three, four, ten times. It’s one of the reasons why, the Trump tariffs are actually reducing investment in physical plant in the United States and reducing the amount of manufacturing products that we’re actually producing anyway. The follow on question from that is, is there a technology out there that might help us to get around that? 

And there, there might there might be, something called 3D printing. Basically, you take a powdered substrate, whether it’s a plastic or a metal, and then you sinter it with a laser, and grow a product. It’s often called additive manufacturing as well, instead of subtractive manufacturing. So subtractive manufacturing was more like punch holes and things. And you start with a block of material and you whittle it down until you have what you need. 

Additive manufacturing or 3D manufacturing? 3D printing is the opposite as you build it up layer by layer. Now, there are plenty of things that this looks very promising for. But the key thing to remember is if it has moving parts, especially moving parts that are different materials. It’s not that this technology cannot be used, it’s just that there are some pretty sharp limits materials, printers that can handle more than one type of material are pretty new, really just in the last 510 years. 

And the speed at which you can do things like this is very slow. So it’s very popular in things like, prototyping where every prototype is unique and then it doesn’t matter if it takes you hours to days to print the product. It’s also very popular in things where, abnormal shapes rule. So especially if you need a lot of strength but not a lot of weight. 

So you’re going to leave holes or bubbles within the material. So for aerospace, there are actually examples of 3D printers already on production floors and to a lesser degree in automotive as well. But the big thing to keep in mind here, speed, in the time that it takes you to stamp 100 products, you’re probably only going to make one 3D printed product, and so while 3D printing is getting incrementally better day by day and that’s great. 

And while it will undoubtedly, as the cost of manufactured products go up, as the globalization kicks in, it will obviously find more and more niches, where it’s the applicable technology, but it will always be coming from behind when it comes to mass application because of that speed issue. So I like the technology. I like the way it’s going. 

We should hurry up and get there.

The AI Race to Regression

The Open AI chatGPT logo on a phone

The AI race has been all the rage, but what if we were racing ourselves straight into regression?

OpenAI’s ChatGPT-5 is extremely powerful; however, it’s less user-friendly than its predecessor and is optimized for institutional users. Industrial and research applications are where the real power of AI lies. So, what happens when those energy-intensive data centers begin to falter?

Well, as globalization breaks down, that faltering is going to become a very real concern. Without an ecosystem that produces and shares all of the necessary components to make these AI behemoths run…we could see a technological regression that threatens the future of AI as we know it.

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Transcript

Hey everybody, Peter Zeihan here coming to you from McCurdy peak. Well, the actual peak is there. Anyway, Peter Zane Company from Colorado. Today we’re taking another question from the Patreon page. Specifically, can you please explain to me this new space age that we’re in the race for artificial intelligence, and what we should look for, what we should worry about? 

Well, let’s start by saying that most of the things that people are talking about with AI are generally, not quite on the mark, for example, a lot of folks think that, OpenAI, that’s the premier artificial intelligence company in United States, that their new program chat, GPT or 5.0, which is supposedly an upgrade, is actually a significant downgrade. 

They find it not as user friendly, not as personable, not as complete. That’s for personal users. AI affects potentially thousands of different applications, and how most people interact with artificial intelligence is in some sort of first person single seat. interface. Like what you get on your phone or your laptop. 

I mean, I’ve got that way too. And the jump from chat GPT four to GPT five was not designed for your single user. It was designed for people who do code for people who designed drugs. It’s designed to bring a huge amount of processing power to things on the back end to basically recreate something. So the institutional users, the design users, they’re actually finding ChatGPT all kinds of fun. 

And some Altmann, who is the CEO of open AI, is going back and kind of taking some characteristics from ChatGPT for to put it in the chat, GPT five, in order to make everybody happy. So that’s all going to work out. Here’s the problem. Software versus hardware. If I’m going to really sum it up, it’s that 

Chat GPT for the algorithm that we all found so groundbreaking really only took up about ten terabytes. And you could easily carry that on thumb drives in your hand. Chat GPT five, more advanced, is at least twice that, probably three times. But OpenAI is not saying. So we don’t know that number for sure. 

The point is, in terms of the raw memory required to make the AI function, it’s really not that impressive. And so if, the corporate espionage or an act of benevolence, OpenAI were to lose control of the algorithm and it got out there in the wild, so to speak, it really could be used by almost anyone. What makes a AI function in the way that we think of it today? 

Not this Skynet future thing, but how it is now requires massive amounts of processing power at data centers. The largest data centers that the world has ever seen are needed in order to deal with the inflow of requests that come in, run the algorithm and spit out the results. Which means that the limiting factor, for the moment, in artificial intelligence isn’t the software, it’s the hardware. 

And this is where we have a really big problem, and it’s not that far away. The ability to make the high end processing chips that Taiwan is famous for, requires, 100,000 steps, 30,000 pieces, 9000 companies, and they’re scattered around the world. The single biggest concentration is then the United States, which is something Americans conveniently forget when they’re talking about sovereignty. 

Number two, concentration is on the Taiwan centric zone. The single most important company is in the Netherlands, but it has facilities in Germany and in Austria and in California, in Japan. But you’re never going to be able to do the chips at all without all of these steps. And a lot of them are single point failures. 

So if you have any degree of globalization, it doesn’t matter really what the countries. It falls out of work. We can’t make them at all. And for the chips that we already have, life span when they’re in a data center is typically in the 3 to 6 year range. So when we get to the point where we realize that we can’t make the chips, we’re going to have a bit of a scramble to see who can control what’s left. 

And then the ability to use AI will shrink from something that you can all have on your phone to simply the handful of entities, whether governments or corporations, that are capable of having their own data center so they can run by themselves and that will be it. Until we reinvent the entire ecosystem and what we have been seeing with most government efforts around the world, including the United States, to reassure the sort of manufacturing it only focuses on the fabrication facilities, which is what is in Taiwan. 

It ignores the design, it ignores the material inputs, it ignores the photo mask, it ignores the wiring, ignores everything else that goes into a successful chip, much less the downstream stuff like testing and packaging that ultimately makes the stuff that ends up in a data center. No one, to my knowledge, is putting any effort into actually bringing the entire ecosystem under one roof, and I honestly don’t even think it would be possible anyway. 

There are too many pieces. There are too many players. And and if you’re looking at the United States, there are not enough technicians that are capable of doing it because we already have record low unemployment levels. So we are in a moment right now where AI is possible with ChatGPT 5.0 and all the rest that will not last. 

And in the not too distant future, we are going to see a technological regression as we lose the ability to make the hardware. And since it took us 60 years to figure out how to do that in the first place, it’s not something that we’re going to do in a season is going to take a mastery. Industrialization process of different parts of the world to do different things, coming together in different ways. 

And that is something that I am not looking forward to. But we’re going to see at the beginning of that within this next decade.